Prescription Drug Trends Projected to Reach Double Digits in 2016

New York (9/24/15) — 

Health benefit plan cost trend rates for 2016 will increase for most medical plan options and increase substantially for prescription drug coverage to double-digit rates, according to forecasts compiled in the 2016 Segal Health Plan Cost Trend Survey, Segal’s nineteenth annual survey of health plan cost trends.Trend is the forecast of annual gross per capita claims cost increases.

Key survey findings include:

  • Trend rates for health maintenance organizations (HMOs) and open-access preferred provider organization (PPO)/point-of-service (POS) plans — the two most common medical plan types offered — are projected to differ by 1 percentage point: 6.8 percent for HMOs and 7.8 percent for PPO/POS plans.
  • Trend rates for prescription drug coverage are expected to be significantly higher in 2016: 11.3 percent for carve-out coverage for actives and retirees under age 65 and 10.9 percent for retirees age 65 and over. Both projections are roughly 3 percentage points greater than projections for 2015.
  • Utilization rates (the number of medical treatments, prescriptions dispensed and hospital admissions) are forecast to drop 1 to 2 percent and are a minor factor in cost increases.
  • Price inflation for prescription drugs and hospital stays are the overwhelming driver of cost increases, especially for prescription drugs, where trend is approaching double digits (9.8 percent), well above the current Consumer Price Index for all goods and services (0.1 percent).

“Whether it is new high-tech surgical or diagnostic procedures replacing lower-cost options, or extremely high-cost specialty biotech drugs growing in popularity, plan sponsors still face significant challenges to manage medical plan cost trends to more sustainable long-term levels,” commented Edward Kaplan, National Health Practice Leader at The Segal Group. “Plan sponsors have already put cost-management strategies, such as adding narrower provider networks and using specialty pharmacy management, into place.”

Mr. Kaplan also emphasized the need for plan sponsors to focus their efforts to decrease health care spending before the Affordable Care Act’s 40 percent excise tax on high-cost health plans goes into effect in 2018. “It is important to make projections now to determine whether, or when, a plan will be subject to the excise tax in 2018 and beyond. As long as medical plan cost trends dramatically outpace core CPI, a substantial number of plan sponsors face paying new excise taxes in the years ahead.”

This survey includes data from managed care organizations, health insurers, pharmacy benefit managers and third-party administrators. For complete survey results, please click here.

The infographic of the key findings can be found here.

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Sibson Consulting (, a member of The Segal Group, provides strategic human resources solutions to corporate and non-profit employers and professional service firms. Sibson's services include benefits, compensation, talent and performance management, communications, sales force effectiveness and change management.

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